InformationWeek

August 28, 2000

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E-Data For A Price

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More on E-marketplaces:

TechWeb E-Business Exchanges Fight For Survival (8/11/00)

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InternetWeek Exchange Will Trade Coffee (7/17/00)

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Industrial E-marketplaces aren't alone in seeing the benefits of offering buyers and sellers supply-chain capabilities and related data. In September, the WorldWide Retail Exchange will begin hosting auctions between retailers such as Best Buy, J.C. Penney, Kmart, and Target, and the 100,000 manufacturers and distributors that supply them with merchandise. The exchange will offer E-procurement as well as supply-chain and category-management capabilities at first, and forecasting and collaborative planning by year's end, says Jerry Storch, president of financial services and new business at Target, in Minneapolis.

When a retailer is out of stock in a particular product, the problem often lies further back in the supply chain, either with a manufacturer or a raw-materials supplier. By mining E-marketplace data, buyers can get a clearer view of the supply chain and potentially reduce the out-of-stock problem, Storch says. That eliminates the need to maintain excess inventory, reduces inventory carrying costs, and improves return on investment for everyone in the supply chain. "The aggregation of so many buyers and suppliers in one place provides the ability to look at demand holistically," Storch says.

Beyond collecting information needed to manage a supply chain, operators of E-marketplaces can provide business-intelligence data that yields insights into market trends such as pricing changes, seasonal buying patterns, and market share. "That information is valuable to us from a strategic, analytical, and tactical standpoint," says Tirthankar Chatterjee, senior business manager with the Chicago food-service division of Bestfoods Inc.

Jerry Storch Photo by Alan Blaustein One online-marketplace operator that has recognized the value in exchange-generated data is Instill Corp. in Redwood Shores, Calif. Instill operates the year-old Purchase Web exchange for the food-service industry, providing a link between food manufacturers and distributors and purchasing institutions such as restaurants, hospitals, and universities. Instill collects data through Purchase Web and directly from distributors, processes it, and sells it to both ends of the supply chain. For example, because Instill sells to national restaurant chains on a local and regional level--even to individual restaurants--it can provide restaurant chains with detailed reports about their purchasing activities. That service is valuable in helping executives get a handle on their chains' purchasing operations.

Instill also aggregates and summarizes the data it collects, without identifying individual buyers, and sells it to manufacturers such as Bestfoods. Under the Instill Market Intelligence program, the company provides manufacturers with a range of statistics, such as market share for specific products. "Those companies are starved for this kind of data," says Dan Beltramo, Instill's market-data director. Instill charges $25,000 to $50,000 a year for the service.

Instill can, for instance, tell Chatterjee what share of the college market Bestfoods' Knorr soups held in June, compared with competing products from Campbell Soup Co. While supermarkets and other food retailers are able to obtain market-share data and related information from A.C. Nielsen Corp. and Information Resources Inc., Instill is the only source for concrete data about the food-service industry, Chatterjee says. Until now, manufacturers such as Bestfoods have had to rely on market estimates and projections from market research firms. "What Instill offers us is data that has little guesswork in it," Chatterjee says.

Ventro Corp., which operates five E-marketplaces, including Chemdex for scientific supplies and Broadlane for health-care products, has assembled a data warehouse containing purchasing data for all its marketplaces. The company gives purchasing managers on the "buy" side and distributors and manufacturers on the "supply" side access to the data warehouse, via Crystal Reports' query and reporting tools. Data from each marketplace is maintained separately.

Buyers access the data warehouse to help manage their own purchasing activities, check invoices to control spending, or find out whether they qualify for volume discounts, says Robin Abrams, Ventro's chief operating officer. While this might not be rocket science, Abrams says that it surpasses what most purchasing managers in Ventro's markets previously had at their disposal: "To them it feels like 23rd-century technology because of where they're coming from."

Ventro now offers basic reporting capabilities to its buyer customers as a service for no extra charge. But the marketplace operator is developing more-sophisticated query and reporting capabilities that will allow these customers to generate more-detailed, customized reports. The ability to analyze trend data--changes in purchasing over time--will be one such capability. And Ventro intends to charge for those expanded services. The price hasn't been set, though. "We're still experimenting with the pricing, to be honest," Abrams says.

For suppliers and manufacturers that use Ventro's E-marketplaces, Ventro provides aggregated, summar-ized data about customer buying habits and market trends. It can also provide suppliers with valuable information such as how many potential customers looked at a company's products on the Chemdex Web site but didn't buy. Like Instill, Ventro doesn't provide information about any individual buyer or seller that uses its E-marketplaces. The company charges suppliers and manufacturers fees for these data services on a case-by-case basis.